EU Crypto Regulation Lags: Watchdog Resource Strain Hinders Progress (2024)

Key Points:

• ESMA faces resource constraints, delaying crypto regulation.
• Varying EU crypto rules are causing investor confusion.
• Despite obstacles, ESMA prioritizes work on the MiCA act.

EU crypto regulation faces challenges due to ESMA’s resource constraints, affecting its ability to evaluate crypto impact and meet regulatory deadlines.

According to Bloomberg, EU crypto regulation is at risk of falling behind due to resource constraints faced by the European Securities and Markets Authority (ESMA).

ESMA, the securities watchdog, is struggling to evaluate the potential impact of cryptocurrencies on financial markets within a timely manner.

EU Crypto Regulation Lags: SMA Struggles with Timely Crypto Evaluation

Therefore, it is unable to meet an Oct. 31 deadline for recommending whether a common type of fund should be allowed to hold crypto assets.

The lack of resources for ESMA highlights a growing issue for EU crypto regulation, especially when comparing to jurisdictions like the US, where Bitcoin exchange-traded funds have accumulated more than $11 billion in net inflows since their approval in January.

The EU is grappling with differences in how some crypto rules are implemented among its member states, leading to confusion for companies and investors.

Readmore: Investing in Tokenized Assets: BlackRock’s New Ethereum Fund Explained

EU Crypto Regulation Comparison with US

EU crypto regulation is also facing challenges with the Eligible Assets Directive, which dictates the type of asset classes funds listed in the bloc can hold.

The European Commission requested ESMA to review a possible expansion of this directive by Oct. 31, including an investigation into whether Ucits funds have been investing in cryptoassets and whether this poses additional risks to retail investors. A report on these findings is expected by the end of 2025.

Prioritizing the Markets in Cryptoassets Act

Despite these obstacles, ESMA is prioritizing the preparatory work on the Markets in Cryptoassets act (MiCA), the EU’s first unified industry legislation, due to take effect starting in January 2025.

As part of the groundwork for MiCA, ESMA is considering hiring new staff and retraining existing employees to focus on crypto, indicating a commitment to advancing EU crypto regulation despite resource constraints.